February Cass Freight Index Report shows signs of improvement, but economic obstacles remain

The February edition of the Cass Freight Index report released today by Cass Information Systems showed some signs of improvement, especially when compared to previous months.

The Cass Freight Index accurately measures trends in North American shipping activity based on $20 billion in paid freight expenses of roughly 350 of America’s largest shippers, according to Cass officials.

As LM has reported, many trucking industry executives and analysts consider the Cass Freight Index to be the most accurate barometer of freight volumes and market conditions, with many analysts noting that the Cass Freight Index sometimes leads the American Trucking Associations (ATA) tonnage index at turning points, which lends to the value of the Cass Freight Index.

Freight shipments in February were up both sequentially and annually in contrast to January, which was down on both fronts, with volumes up for the first time in four months. Shipments—at 1.077—were up 5.6 percent compared to January and up 0.5 percent compared to February 2012. February represents the 31st consecutive month shipments were above the 1.0 mark since May 2010, when shipments moved above the 1.0 mark for the first time since November 2008.

The report explained that the sharp increase in February shipments—compared to a 4.8 percent drop in January—is partially due to rail’s strong performance over the last four weeks, with carloadings and intermodal units up 3.7 percent and 6.9 percent, respectively.

In her analysis of the data, Rosalyn Wilson, senior business analyst with Delcan Corporation and author of the annual CSCMP State of Logistics report, said that the transportation sector has been demonstrating what she said was an uneven performance.

Wilson noted that carloadings and intermodal units were up two weeks and down two weeks, with intermodal down 5.2 percent the week ending February 28, and she added that the American Trucking Association’s truck tonnage index has grown over December and January, which she said would seem contrary to the trend in the Cass index.

“The Cass shipments index is not a reflection of tonnage carried, so the two could vary for a variety of reasons,” Wilson wrote. “The most likely reason for the difference in the last few months is that the average weight of a shipment rose during the period. In addition, the trucking industry remains at or near capacity and there was no indication of capacity pressure or truck shortages, suggesting that the same number of trucks were handling more tonnage per shipment. Anecdotal evidence also supports fuller loads for LTL carriers.”

February freight expenditures at 2.273 were 1.8 percent above January and down 1.0 percent compared to February 2012.

The report pointed out that the weak performance of the economy has prevented carriers from implementing rate increases, stating that most of February’s expenditures’ growth can be attributed to heavier loads and fuel surcharges.

Wilson said that while her 2013 GDP forecast is below 3 percent, February has produced a “mixed bag” of economic indicators, with housing sales up and February building permits reaching its highest level in four years, coupled with strong automotive sales over the last three months and manufacturing growth appearing to be back on track.

Conversely, the impacts of the federal budget sequester and government spending cuts and personnel furloughs, a payroll tax increase, weak retail sales, high fuel prices, ongoing global economic decline, and weak job growth, high unemployment and rising operating costs all serve as negative headwinds. March, she said, is likely to be similar to January and February in freight transportation, with the impact of the government spending cuts not hitting all at once but are likely to have long-term effects on the economy.

Stifel Nicolaus analyst John Larkin wrote in a research note that the economy is still searching for direction.

“While housing, auto, and energy development sectors continue to show strength, overall consumer spending appears to have plateaued as the resumption of the full payroll tax, rising gasoline prices, and muted job creation have all taken their toll,” he noted.